IMPLICATIONS INTERNATIONAL BUSINESS OF TRUMP’S PLANS TO PUT AMERICA FIRST

On 22 January 2025, on BNR News Radio 📻

TRANSFERs CEO, Gerald Baal, was asked to explain entrepreneurs and export directors on how Donald Trump’s election to the presidency will affect international trade with the USA and proposes solutions to this situation.

The second part of the interview was a very fascinating business stories of entrepreneur Patrick de Nekker, from earth water

Trump’s Plans

Trump’s ideology of America first has been his most popular remark between his followers this election process. After his inauguration party, he proceeded to sign multiple executives orders about various topics of interest to the Republican Party. Multiple of those were regarding imports and exports protectionism laws, in order to protect the US market from foreign economies. The main countries that the Trump administration plans to inflict harsh tariffs and quotas on are: Mexico, Canada, China, and the European Union. These implications mean that the US is on its way to protect its markets by making it harder for its main exporters to get their exports into the country.

To start with, what are the announced plans of Trump’s current administration?

Secondly, in this article, you will be able to read about how to cope with the possible increase of US import tariffs. 

 We divided in three groups: European Union, Canada/Mexico and China.

 

USA 🇺🇲 -EUROPEAN UNION  🇪🇺

Trump has stated that the US has been treated unfairly by the European Union when it comes to trade. As he has been vocal about the tariffs that have been imposed by the Union are unbalanced by comparing them to the American ones. The current major tariffs set between them are:

  • A 3.5% tariff from the EU to US and 2.7% from the US to EU on average of exports of goods, with higher tariffs on steel at 25% and aluminum at 10%.
  • The US implements tariffs on Aircrafts of 10% and on agriculture goods up to 25% which has generated tensions 
    • As part of the aircraft subsidy conflict, the US imposed 25% tariffs on various EU agricultural products, including: Cheese, Wine, Olive oil, Pork

The propositions for his new term are the following:

Matching Foreign Tariff Rates: The administration plans to impose tariffs equivalent to those that U.S. products face abroad. This means if a European country imposes a 15% tariff on a U.S. product, the U.S. would reciprocate with a 15% tariff on similar European goods.

New Agency for Tariff Collection: Trump has announced the creation of the External Revenue Service, a proposed U.S. government department dedicated to collecting tariffs, duties, and other revenues from foreign sources.

New tariffs on European exports to the U.S.: On January 2025, Trump suggested tariffs range from 10% to 20% and are aimed at key industries, including automotive and industrial sectors, with a particular focus on Germany.

His administration plans to renegotiate the terms and use it as leverage to increase the purchases of the European Union of energy products and military equipments from the US.

USA 🇺🇲 – CANADA 🇨🇦 – MEXICO  🇲🇽 

The neighbors from the United States might receive the harshest import barriers. Through his electoral campaign, Trump has been vocal about restricting access to the American border from Mexico. The proposed import barriers are part of the plan to reach this goal, yet he has also mentioned on also imposing them to Canada as well.  The following are the plans he has for the Mexican and Canadian exports:

 

Imposition of New Tariffs

 After his inauguration, president Trump announced his intentions to impose a 25% tariff on all imports from Canada and Mexico starting on the first of February. This could cause:

  • Retaliatory Measures: Canada and Mexico might respond with their own tariffs on U.S. goods, escalating trade tensions and disrupting established supply chains.
  • Legal Disputes: The introduction of tariffs would likely breach USMCA provisions, potentially resulting in legal challenges and undermining the credibility of U.S. trade agreements

 

Potential Renegotiation or Withdrawal from USMCA

  • Reinstatement of Pre-USMCA Tariffs: Without USMCA, the preferential tariff rates could be lost, resulting in higher costs for imported goods.
  • Regulatory Divergence: The absence of a unified trade framework might lead to differing standards and regulations among the three countries, complicating compliance for businesses.

 

Stricter Rules of Origin and Content Requirements

  • The administration may push for more stringent rules of origin, requiring higher percentages of North American-made components in products to qualify for tariff exemptions
  • Import Quotas: Establishing limits on the quantity of certain goods that can be imported.
  • Sector-Specific Tariffs: Targeting specific industries perceived to contribute significantly to trade imbalances. Especially in the automotive and agricultural sectors.

 

Enhanced Border Inspections and Customs Procedures

  • In line with President Trump’s focus on border security, there could be an increase in inspections and more rigorous customs procedures.
  • While aimed at addressing security concerns, these measures might slow down trade, causing delays and higher costs for importers and exporters.

USA 🇺🇲  – CHINA 🇨🇳

Trump’s focuses on reducing the U.S. trade deficit with China by imposing tariffs and renegotiating trade deals to favor American industries. He aimed to counteract what he perceived as unfair trade practices, including intellectual property theft and forced technology transfers.

 Current Tariffs:

  • US: High tariffs on Chinese electronics, machinery, and textiles due to trade disputes.
  • China: High tariffs on US agricultural products (e.g., soybeans, pork, and wine) during trade conflicts.
  • The average effective tariff rate on Chinese imports has increased from approximately 3% to around 11% in recent years.

 

New proposal: 

  • After being sworn in, President Donald Trump proposed a 10% tariff on goods from China and a 20% tariff on all other U.S. imports.
  • He mentioned he would like to impose it in order to control the fentanyl epidemic happening in the U.S.

Current Situation 

  •  The American government have complaints about Chinese subsidies in industries like solar panels and steel.
  • China plans to implement duties on US chemical and industrial products in response to trade measures.
  • Chinese State aid indirectly limits market access for US products in strategic sectors (e.g., tech, aviation). Regional variations favor industries in certain provinces (e.g., Guangdong for tech, Shandong for agriculture).

Viable strategies for companies looking to mitigate the impact of high tariffs and gain access to the U.S. market. 

  • Diversification of Trade Partnerships: 
    • Experts recommend that European companies seek to diversify their export markets to reduce dependence on the U.S. By exploring opportunities in emerging markets and strengthening European trade, businesses can mitigate the risks associated with U.S. protectionist policies.
  • Enhancing Competitiveness:
    •  Investing in innovation and improving competitiveness are advised strategies. By focusing on high-quality production and technological advancements, European companies can better withstand external trade pressures. Exporting products and solutions with a high added value, makes them less vulnerable to price increases that may occur due to increasing import tariffs.
  • Engaging in Policy Dialogue:
    •  Specialists suggest that European governments and industry leaders engage in constructive dialogue with the incoming U.S. administration to advocate for fair trade practices and seek mutually beneficial agreements. Diplomatic efforts may help in reducing the likelihood of a full-scale trade war.
  • Legal Recourse:
    •  Pursuing legal challenges through international trade bodies like the World Trade Organization (WTO) is another recommended approach. By contesting the legality of the proposed tariffs, the EU can seek to protect its economic interests within the framework of international trade law.
  • Setting up an assembly or production facility in the U.S.
    • Avoidance of Tariffs
    • Subsidies and Incentives such as tax breaks, financial assistance for building facilities, and access to local workforce training programs
    • Depending on the region in the U.S., companies may also benefit from lower transportation and production costs when serving both U.S. and Canadian markets.
    • Last but certainly not least, being a company with a local production facility, one would also benefit from the higher import tariffs.

Influence of the Dollar / Euro exchange rate

A topic, not so much heard in the news lately, is the possible influence of a changing exchange rate between the two currencies. It could go two ways:

1. The US Dollar increases in value due to a growing confidence in the US Economy thanks to the new Administration. This would make the export of EU products in euros to the USA, cheaper. In this case, the possible increase of import tariffs, would be compensated by a cheaper Euro.

 

2. The US Dollar decreases in value due to a growth of importance of cryptos, as Donald Trump and his wealthy advisors from the US business world. This could cause a decrease of the Dollar towards the Euro and consequently, make European exports to the US, more expensive. However, it would make investments in the USA with a higher Euro, cheaper. Hence, the above-mentioned strategy of local assembly/production, would in this case become more interesting.

Get in Touch!

If you are interested in this country, or you would like to expand to one of the other main markets in the Americas or Europe, contact us via the form, and we will get back to you shortly.

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